Posts Tagged ‘banking’


The NBU, the SBU, wiretapping and shenanigans all round

November 24, 2016

Wiretapped telephone conversations of a former Deputy Head of the NBU, now Director for Banking Supervision at the NBU Ekaterina Rozhkova have appeared on the Internet.

The internal workings of the National Bank of Ukraine, or any national bank, are far beyond the competencies of this blog.  It may be that what these telephone recordings prove is really rather standard fare within central banks other than that of the NBU – unfortunate if true.

Prima facie however, the wiretapped conversations would seem to display something bordering upon criminality in the collapsing of St Michael’s Bank and also in the support of Platinum Bank.

A cynical reader may perhaps ponder whether some bank owners simply orbit the wrong political planets when it comes to the “independent a-political” support of the NBU.  With the banks mentioned in the recordings clearly some bank owners are close to currently powerful figures, such as Granovsky, Lozhkin etc., – and some aren’t.

Cynicism redirected however, there is another side to the tale of these apparent NBU shenanigans and the wiretapping that disclosed them.

The only State agency permitted to conduct wiretapping is the SBU.


SBU Chief Hrytsak however states that the SBU received no requests to carry out the wiretapping by any authority relating to Ms Rozhkova, and it would appear the wiretapping is also not the product of an on-going SBU investigation – for Mr Hrytsak claims the SBU does not even have the wiretap recordings (other than what can be gleaned from the Internet).

The recording however are clearly the result of good tradecraft.

If the SBU received no authority and sought none regarding these wiretaps that they claim not to even posses, then who carried them out?

If not officially the SBU, perhaps then unofficially the SBU?

If so who within the SBU, to what end, for whom, for what reward etc?

There are counterintelligence questions to be asked within the SBU if its officers are “for hire” – and if “for hire” for hire to whom considering the varying levels of external infiltration that will still exist within all State structures of Ukraine.

If it wasn’t the SBU, whether or not it was carried out by another foreign or domestic institution equally demands the SBU set about discovering who that was – and why.

Clearly NABU would be wise to use this incident to reassert its need for its own “in-house” wiretapping abilities – the case for not relying upon the SBU made clear by such a poor public (and quite possibly internal) display in the handling of these illicit wiretaps.

Meanwhile, as media and SBU encourage a reader to look at these events within the NBU, there is an equally disturbing story relating to the SBU and the wiretapping itself otherwise ignored.

Will anything come of any NBU nefariousness when evidence is based upon the foundation of an illegal wiretap?  A question to be answered later perhaps.


Banking of interest (not with interest) Odessa

November 16, 2016

Much is written regarding the banking system in Ukraine.  Normally relating to the on-going clean-up of the nefarious Ukrainian banking sector by the NBU, or relating to the alleged nefarious actions of the NBU itself.

It therefore catches the eye when a small provincial bank in Odessa is to be bought by an Austrian investment banker with a curriculum vitae that clearly infers connections within the elite strata of Vienna.

The bank in question is called Investbank which certainly does not have much high street recognition in Odessa despite being a bank of Odessa.  Indeed, it is not a “high street bank”.

The Austrian purchaser, or at least soon to be majority shareholder, is Uwe Christian Eshner.  The current owners being Alexander and Tamara Nezvinsky, Nick and Igor Teplitz, and Sergei Yablonsky.

Unsurprisingly, for a provincial bank with no high street recognition, in the national ranking by size of assets, the bank falls within the smallest 25%.

That it was available for purchase is not exactly a secret.  Some years ago it could have been bought for $100 million or so.  No doubt the purchase price will be substantially less considering the dramatic change of circumstances Ukraine has found itself subject to.


Clearly Mr Eshner is purchasing the majority share to own a fully licensed banking vehicle in Ukraine – though why Investbank when there are perhaps better deals to be struck with the NBU over insolvent licensed entities is perhaps a question some readers will ponder.

Austrian banks and bankers certainly have a “reputation” within Ukraine and among the Ukrainian elite and organised criminal class for being “helpful” when it comes to moving money out of Ukraine (and laundering it).  Who among of the very elite of Yanukovych/”Family” did not have Austrian bank accounts and expensive property in Vienna?

Mr Eshner of course will not be unaware of such things.  His Bloomberg profile boasts a history that began to “build up and develop extensive contacts to Central Eastern European countries” in the early 1990s.  Thus even if not partaking in, nor facilitating any nefarious activities, it is beyond belief that during the mad 1990’s when Mr Eshner began his banking expedition into the eastern-European nations he will have been unaware of what what brazenly going on in both Austrian and CEE banking.

(Indeed, a reader may ponder whether the infamous Udo Proksch was in any way related to one of the favoured Yanukovych Austrian bankers Reinhard Proksch.)

As a healthy level of cynicism is a requirement for living in Odessa, there are some questions that arise that may be without foundation – or not.


Considering the amount of elite “Ukrainian interest” past and present in Austria, who if anybody is behind Mr Eshner?

By extension, whose money is buying this banking vehicle?

What is this banking vehicle to be used for by Mr Eshner?

Is it to become a front for “interests” behind a respectable face?

Is it a bank where transactions will now be, or should be placed on a “watch list” if not by the NBU, then by the international policemen and spooks?

Did this banking purchase raise the same raised (interested) eyebrow with international policemen and spooks as it did the blog?

Why are the blog flags raised over this when there is nothing prima facie untoward?


Jerking knees and poor policy – Kyiv (Panama Papers)

April 7, 2016

Having written a few words regarding the “revelations” surrounding President Poroshenko and the offshore companies recently registered that were exposed in the Panama Papers, followed by a few more lines about the Ukrainian media missing the wood for the trees, as predicted in the first related entry knees are jerking in Kyiv – “One expected outcome for the long pending draft legislation on the use of offshore companies in Ukraine, will in true populist fashion now see it swiftly come to the vote in the Verkhovna Rada.”

That prediction, obvious as it was for a populism driven seat of power, has been outdone by presidential promises to ban offshore entities (presumably including his own – or those created to serve the purposes of those with Power of Attorney/Blind Trust responsibilities).

“I plan to spend a significant reform that can prevent the use of offshore accounts in Ukraine” – President Poroshenko 

Naturally such promises would be met with a good deal of skepticism in a normal “presidential promises” environment.  The list of unfulfilled presidential promises is long, both publicly made to the Ukrainian constituency and also privately to certain individuals.

Nevertheless, when at the centre of the storm, it is perhaps politically unavoidable but to ride the momentum and take control of the issue – and as this latest statement is born of circumstances surrounding the President himself, there is a worrying chance this may actually occur without proper consideration.

As stated in entries prior – “As much as this blog is very much against anonymously owned corporations and companies and their specific use in tax avoidance or other nefarious deeds, it will concede that under certain circumstances, offshore companies make sense if transparently owned and run.”

But isn’t the ban proposed by President Poroshenko better than the existing situation of hidden ownership, the siphoning off of nefariously acquired cash, tax avoidance and/or evasion?


Perhaps it is – but jerking knees avoid all nuance.  It is necessary to consider other reasons for offshoring when it comes to Ukraine aside from the those headlining in popular reasoning.

The most overlooked driver for the oligarchy when it comes to backing political parties and “owning” parliamentarians, (aside from passing favourable legislation, blocking unfavourable legislation and attempting to keep their place at the subsidy and State contract trough) is one that any other investor would have serious concerns about – property rights and the protection of assets.

By taking ownership of investments outside of the jurisdiction of the notoriously corrupt and inconsistent Ukrainian judicial process, the risks of having property rights swept aside, and thus the increased security of property rights over investments, allows investors to have a little more confidence.  Add in contractual arbitration in Stockholm or London courts, and there is perhaps sufficient daylight between the Ukrainian justice system and business to make it worth the risk.

What (genuinely) foreign investor looking at, or that is already in, Ukraine will make the value of his FDI subject to the fate of the Ukrainian judiciary as the unreformed and chronically corrupted judicial system stands?  Is the presidential plan to reduce potential sources of FDI by banning offshore?  Is it not prudent to reform the judiciary and legal mechanisms in Ukraine to instill confidence prior to simply banning offshore?

Further, is it not wise to adjust and amend tax legislation not only to encourage FDI but (if deemed necessary) to tax final beneficiaries as if they were direct owners without offshore entities?  How that would effect existing Double Taxation Conventions/Treaties with other nations would require some serious legal attention and may not be as simple as it first appears, notwithstanding having unintended consequences regarding both potential FDI and existing investments/assets.

Ukrainian taxes are already very low compared to almost every other nation on the continent, thus Ukraine itself would be an attractive offshore centre if only its relevant institutions and judiciary were not so terminally corrupted, nor its statute book so replete with legislative flapdoodle and taxation codswallop.

There is then the most obvious of reactions to knee jerk bans – it makes those using offshores for entirely nefarious purposes dig even deeper underground, and perhaps even expand that category of activity having been forced from the existing legal realm.

There is nothing particularly objectionable about a ban on offshore companies, but Ukraine is in no position to simply impose a blanket ban on offshore companies at least until it offers FDI a predictable, reliable, and proportional judicial system that protects property rights.  It will have to present a tax system that severely restricts the opportunities for illicitly “soliciting” or “coercing” or “extracting” revenue from either companies directly, or from within the numerous faulty parts that form the machinery of the State system.

There is nothing wrong with a ban on offshore companies if that is to be the policy.  However that policy has to be accompanied by a strategy that will prevent the otherwise fairly clear counterproductive outcomes of a knee jerk blanket ban.

There is surely a far more nuanced policy that can be achieved that will provide more transparency, reduce tax avoidance and/or evasion, avoid FDI flight, and make Ukraine more attractive than to simply “ban” because it is the headline issue of the day surrounding the president.

Promising to address or review offshore usage in the immediate future is absolutely right – all policy should be reviewed from time to time, and now it is politically expedient.  However to state the headline issue of the day will simply be banned is really rather unwise.


Going against the grain – Cargill (USA) & Delta Bank

March 18, 2015

On 3rd March the National Bank of Ukraine dramatically hiked interest rates from 19.5% to 30% overnight, as part of a pick ‘n’ mix bag of measures to help support the currency.

That same day, the NBU announced that Delta Bank, then the 4th largest bank in Ukraine by way of assets, had gone into temporary administration and was part of the cleansing of the banking system of insolvent banks.

For months the NBU had been trying to find a way to keep Delta Bank running, as its insolvency could have forced a run on the banks – however with the headlines naturally concentrated upon the dramatic rate increase, it was thus not a bad day to bury bad news regarding Delta and the liabilities the State would have over deposit guarantees.

Like comedy, everything is in the timing.

Delta Bank was/is owned 70% by Nikolai Lagun and 30% by US agriculture group Cargill via its Ukrainian enterprise.

What is less well known is that on 5th February, those in Kyiv authorised the transfer of loans from 9 “troubled banks” to other lenders.  Amongst those authorised were Cargill Financial Services International – those loans transfered in excess of $100 million.

Thus Cargill’s Odessa based interests – Ilichevsk Grain Port, Stroybud Illichivsk, Yablunevy Dar and Tank Trans – were offered new loans directly with Cargill Financial Services International and can no longer be classed as “debtors” to Delta Bank during its temporary (or perhaps permanent) insolvency.

All of this occurring prior to a recent changes in Ukrainian banking legislation, increasing the liability of bank owners.

Bravo Cargill – its shareholders should be proud that it managed to mitigate its liabilities as part owner of Delta Bank almost entirely.  Unfortunately, the society in which Cargill’s Odessa assets are located and operate, is now forced to pick up the State guarantee tab for the Delta Bank depositors who have lost out.

Ergo,  despite no inference of anything illegal occurring, there is indeed reputation damage to Cargill.  Naturally it rubs against the grain somewhat.

So, having managed to salvage in excess of $100 million, whilst leaving the tab for many of those employed by the company, those within its supply chain, and for the local population to pick up – whilst also avoiding the newly imposed legislative liabilities for bank owners – perhaps a little gesture of goodwill would be in order lest such a story gather yet more local momentum, recognition and umbrage?

For a chump change (and probably a tax write-off), as well as investing in Cargill’s future local personnel, and also uplifting the “Brand USA” image, perhaps a charitable overhaul of Odessa Agriculture University’s IT and laboratories would be worthy of consideration?  A dozen annual agricultural scholarships to US universities?  Some goodwill tangibly sown back into the local community?

Naturally this blog has to declare an interest, and recognises that this entry is perhaps slightly biased – not being a shareholder in Cargill, but being a taxpayer that is left to pick up the State guarantee tab.


Moody’s downgrades 11 Ukrainian banks

December 11, 2012

If anybody still pays attention to the credit assessments of agencies such as Moody’s, Fitch and S&P, and I have to be quite honest and say I don’t and never have, then yesterday those who still have faith in their accuracy and independence may have noted that Moody’s downgraded 11 Ukrainian banks.

Those downgraded were Privat Bank, OTP (Ukraine), Ukreximbank, Raiffeisen Bank Aval, Sberbank (Ukraine), First Ukrainian International Bank, Pivdenny, Oschadbank, Dnepr Bank, Prominvest Bank, Ukrin Bank and Aval.

I believe that VAB and Finance and Credit Bank were also downgraded but I am still checking that.

As that list includes almost every major domestic bank in Ukraine, I can only assume that it is not a reflection on the banks themselves but a readjustment after Moody’s downgraded the Ukrainian government from B2 to B3 last week –  and thus a trickle down of that risk assessment to the biggest national banks as a consequence.


PayPal in Ukraine and Russia

August 30, 2011

It has always seemed something of a pain for the few US citizens I know that PayPal did not work in Ukraine and Russia.

There is a rumour that from 24th September 2011, I will no longer have to listen to their incessant whining about this and PayPal will now operate in both nations.

I hope the rumour is true!

%d bloggers like this: